Crouch poised to cherry pick portfolio

Andrew Wily showing there's more to life 

than being a bankruptcy trustee.

Photo courtesy Andrewwily.com.au

SITTING on a beach at Byron Bay, Crouch Amirbeaggi co-principal Nicholas Crouch is a long way from the worries occupying fellow insolvency practitioner Andrew Wily.

The head of armstrongWily is currently organising his voluntary retirement from life as a registered bankruptcy trustee, part of which entails working out what to do with more than 400 bankruptcy appointments prior to the deadline imposed by AFSA.

That date is described by the bankruptcy regulator in the following, somewhat flexible terms: "It presently is anticipated that the Inspector-General will accept Mr Wily’s request to cease to be registered shortly after 30 May 2015."

SiN understands about 150 of Wily's bankruptcy files are active. When contacted Crouch confirmed he'd spoken with Wily about taking over some of the jobs. However he said he "wanted to see what was in them" first and mentioned that Wily was speaking to other trustees. It's possible the pick of the portfolio might go to tender.

The most obvious way to effect the transfer of bankrupt estates to other trustees is via Section 181 of the Bankruptcy Act which states: "The creditors may, by resolution, at a meeting of which not less than 7 days' notice has been given, remove a registered trustee appointed by them, or a registered trustee who is, by virtue of subsection 156A(3), the trustee of the estate of the bankrupt concerned, and may at the same or a subsequent meeting appoint another registered trustee to be trustee in his or her place."

Another avenue might be by applying to the court for an order apportioning the jobs to specific trustees named in the application. That however would deny creditors their right to object to the nomination of a particular trustee without having to incur the cost of opposing the nomination through the courts.

None of that of course is occupying the mind of the sports-loving Crouch who - presently ensconced on the NSW far North Coast - is about as far away from Wily's woes as a Sydney-based insolvency practitioner can get, apart of course from those who've already jetted off for San Francisco for the INSOL Conference, which kicks off next Sunday.

See also EXCLUSIVE: Wily relinquishes bankruptcy ticket

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EXCLUSIVE: Dolores Lavin declares bankruptcy

The Wylde Street Potts Point complex housing
Dolores Lavin's cherished home.

FOLLOWING her failure to win a reprieve in the High Court, artistic agent Dolores Lavin has declared bankruptcy in a move unlikely to satisfy ex-bestie Paola Toppi, who has a court judgment and bankruptcy notice ordering that Lavin pay Toppi and her husband Neil Cunningham more than $870,000.

Documents obtained by SiN show Lavin was registered as a bankrupt on the national personal insolvency index on February 19, 2015, a week after the High Court shut the last door on her fight to avoid recovery proceedings Toppi of Machiavelli Ristorante fame commenced in 2011.

Worrells' Aaron Lucan has consented to act as trustee of Lavin's bankrupt estate but given the dealings that have taken place regarding the proprietorship of Lavin's ritzy Wylde Street apartment in Potts Point, it promises to be anything but boring.

On September 13, 2013 a Deed of Change of Trustee was registered. Listed on the deed of change are Lavin, accountant Constantine Savell, Billy Buckle Pty Ltd and The Wylde Family Trust. Effectively the deed empowers Savell as appointor of the trust to appoint Billy Buckle Pty Ltd, replacing Lavin as trustee of the The Wylde Family Trust.

EXCLUSIVE: Wily relinquishes bankruptcy ticket

Andrew Wily, happier without the stress
of working on profitless bankruptcies at the behest
of AFSA. Photo: Andrew Wily  

ARMSTRONG Wily principal Andrew Wily has confirmed he has surrendered his registration as a trustee in bankruptcy, blaming onerous regulation and meagre profits.

"It's been brewing for a while," Wily told SiN when asked when he decided to give up his ticket. "It's a process that will go on for months of winding down, that's all," he said.

The Australian Financial Security Authority (AFSA), which regulates personal insolvency, refused to comment when contacted. Wily's name and contact details were still present on the AFSA website's lists of registered bankruptcy trustees at time of writing, despite Wily confirming he could no longer accept appointments.

"The story with bankruptcy these days is that it's very regulated and the regulator wants everybody to do a lot of work in matters that have no money in them," Wily told SiN. "They're saying 'we don't really care if there's any money in the job or not. You have to do a whole heap of work'.

"So that means you have to employ a lot of staff, and do a whole lot of work and there's no assets in them. It's a commercial decision as to how much work you do. I think I had over 300 files at one stage," he said.

Wily denied that AFSA had pressured him to relinquish his ticket in the wake of an application late last year in the Federal Court by the liquidators of Timbercorp Finance.

In November 2014 Mark Korda and Leanne Chesser of Korda Mentha sought an inquiry into Wily's conduct and his removal as trustee of the bankrupt estate of  Melbourne-based financial advisor Peter Raymond Holt, who was banned from providing financial services for three years in September 2012 in relation to Timbercorp investments made by his clients. 

Wily said the application caught him by surprise because he had earlier approached the liquidators, seeking funding to carry out further investigations. He said he also provided lawyers for the liquidators with full access to his case files.

"No, there were no issues on that one but there's no doubt that AFSA's looking at all trustees at the moment," he said. "They're saying, 'guys you've got to keep the high levels of work up and if you don't you've got to start thinking about exiting the industry'," Wily said.

When asked if AFSA had tapped him on the shoulder in relation to an appointment other than Timbercorp Wily was equivocal, saying only that he had an enormous amount of work in progress built up over the years. That work will pass to the Official Receiver who will then allocate it to eligible private trustees.

Wily meantime will focus on corporate insolvency work, when he's not fishing and ridding properties of feral pests.

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Bankruptcy notice reactivated as Paola Toppi successfully defends former friend's high court appeal

Paola Toppi, co-owner of the popular Machiavelli restaurant on Clarence Street, has resurrected bankruptcy proceedings against her former friend and business partner Dolores Lavin after the High Court yesterday threw out Lavin's application to have an earlier decision of the Supreme Court overturned.

As of today Lavin has 13 days to comply with a demand she pay Toppi and her husband Neil Cunningham up to $1.2 million. It's almost 10 years since the pair began borrowing millions of dollars from NAB to start and fund their Luxe Studios photographic business.

By 2009 the relationship had soured. Accusations of gambling debts emerged. Toppi was locked out of the Luxe premises on Liverpool Street Darlinghurst. She retaliated, installing receivers in January, 2010. They sold off the Liverpool Street property in June of that year for $4.9 million. NAB then commenced recovery proceedings against all three and their related entities, seeking an additional $4.25 million.

Toppi and Cunningham eventually made good their $2.9 million share of their obligation as co-sureties to NAB by selling their home, although they wore a $1 million haircut on the sale because an earlier offer of $5.6 million had to be declined because at the time the offer was made, the Liverpool Street property had not sold.

Lavin meanwhile had made her own settlement with NAB, paying out $1.35 million and negotiating a deed of settlement that included a covenant from the bank that it would not sue her in relation to the matter. Toppi and Cunningham reasoned that Lavin, as a co-surety to the loans from the beginning, appeared to have extricated herself for a lot less than it had cost them. They initiated proceedings to recover around $800,000. Lavin for that matter launched action to recover $400,000 in excess interest she said accrued because of Toppi's decision to appoint receivers.

Ultimately Toppi and Cunningham's action led to a judgment debt and the issuing of a bankruptcy notice against Lavin in 2013. There have been multiple stays but yesterday's High Court ruling is the end of the line for Lavin in terms of avenues of appeal. The clock is ticking. A creditor's petition hearing must be considered imminent unless Lavin can engineer an alternative.

Toppi and Cunningham were represented by Beazley Singleton Lawyers whilst Lavin was represented by Websters Lawyers.

For an in-depth account of this sorry saga see: Toppi seeking to bankrupt ex-bestie. The High Court's determination can be read at: Lavin v Toppi [2015] HCA 4 (11 February 2015)

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Chapter 11 - Tough choices confront trade creditors when a retailer faces bankruptcy

Dan A Lowenthal. Partner and specialist attorney,
Patterson Belknap, Webb & Tyler LLP.

Following the inquiry into the performance of ASIC, the Senate Economics Reference Committee released its report in June 2014. Among other things the committee recommended that government instigate a review of current insolvency laws.

Recommendation 61 of the Senate report called for the review to look at the potential for incorporating elements of America's Chapter 11 bankruptcy reorganisation provisions down under.

The government's new assistant treasurer Josh Frydenberg told SiN through a spokesman this week that those recommendations will be incorporated into the government's overall response to the findings of the Murray Financial System Inquiry, which is currently subject to a period of consultation with submissions closing on March 31, 2015.

Regardless of when we learn what recommendations have been accepted, talk of applying America's Chapter 11 reconstruction provisions to Australia's insolvency regime is recurrent and will likely persist as long as flaws in the existing legislation periodically throw up problematic outcomes.

Every shockingly expensive insolvency that seems to provide no return for creditors whilst compensating appointees handsomely provides Chapter 11's proponents with another justification for calls to embrace the American way which, in the end, largely sidelines insolvency practitioners and puts lawyers in the box seat.

In the interests of sustaining debate around significant areas of insolvency reform, SiN presents the following piece by New York-based bankruptcy attorney Daniel A. Lowenthal, reprinted with permission from the October 2014 issue of the Journal of Corporate Renewal, published by the Turnaround Management Association.

Bytecan can't - telco servicer installs VA

ESTABLISHED telco services outfit Bytecan has appointed Steve Nicols of Nicols + Brien as voluntary administrator (VA) of the company, putting the immediate future of around 120 staff potentially in doubt.

SiN has learned that the company was until recently quite profitable and that a number of clients and other players in the telco and communications services space are examining various assets. Majority owned by interests associated with Wayne and Lea Kitchener of Como in Sydney's south, Bytecan was established in 1990. A first meeting of creditors is to be held in Sydney on Friday, February 6, 2015.   

Boasting revenue of about $20 million per annum, Bytecan apparently owes around $1.6 million to the Australian Tax Office (ATO). The company provides maintenance, testing and other technical communications services and expertise to telcos and has worked with all the majors. Another victim of the NBN perhaps?

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Condon wins property sale proceeds despite court's refusal to brand trust a sham

More red carpet than the Academy Awards after a massacre.
The Robson Road Kenthurst property.
Photo: LJ Hooker

TRUSTEE in bankruptcy Schon Condon has won the right to almost a million dollars in property sale proceeds after the Federal Court ruled that bankrupt Colleen Anne Lewis (Rayhill) is a creditor of a discretionary trust, despite the trust's current trustee arguing she has no interest.

The judgement of Justice Jayne Jagot can be read in full at: Condon (Trustee), in the matter of Colleen Rayhill (Bankrupt) v Truthful Endeavour Pty Ltd. It represents a potentially encouraging outcome for trustees in bankruptcy and creditors who find themselves frustrated by the courts' general reluctance to rule that a trust is a sham or was created specifically to defeat creditors.

The ruling also suggests that submissions in separate proceedings that Condon has been harassing the Lewis family, also known as the Rayhill family, were given short shrift by Justice Jagot.

At the heart of Condon's application was the view that he, as trustee in bankruptcy of the estate of Colleen Lewis (Rayhill), was entitled to funds he alleged she used to buy a sprawling property on Robson Road, Kenthurst in Sydney's north west which was later sold.

Robson Road Kenthurst.
Photo: LJ Hooker

Purchased in 2001 for $1.7 million, the property was an asset of the Kenthurst Investment Trust. Condon has been arguing that payments the bankrupt made in relation to the Robson Road mansion substantially exceeded the eventual sale price and that the excess should pass to himself as trustee in bankruptcy.

The Kenthurst Investment Trust's current trustee is Truthful Endeavour, the respondent in these proceedings and a company connected to Louise Lewis, one of the bankrupt's daughters.  Previously, the bankrupt had been trustee of the Kenthurst Investment Trust.

Truthful Endeavour rejected Condon's claim that the bankrupt had made the payments, arguing that they were made by three companies and if there was a creditor to the trust it is the companies and not Colleen Lewis.

Further, Truthful Endeavour argued that Condon was estopped from bringing the proceedings, given earlier hearings in the Supreme Court.

Whilst declining to rule that the trust was a sham, Justice Jagot rejected the respondent's arguments, finding that Colleen Lewis is a creditor of the trust, that Condon was not estopped and that the bankrupt's entitlement to a portion of the Robson Road sale proceeds therefore vests with Condon.

The judge ordered that the proceeds be transferred to Condon and that Truthful Endeavour pay his costs. Calls to the respondent's solicitor Bruce Dennis seeking to determine if his client would appeal were not returned.

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